Washington's Wealth Boom

Take a look at this map. The areas shaded in red are the 100 wealthiest counties in America according to per capita income. At first glance, it's a little misleading, because in the American West, counties tend to be larger in geographic area. But look closely, and you'll see that after the New York City metropolitan area, the largest cluster of wealth in the U.S. is huddled around Washington, D.C.

If we look at household income, the picture grows starker. After the 2000 Census, the richest county in America was Douglas County, Colorado. By 2007, Douglas County had fallen to sixth. The new top three are now Loudon County, Virginia; Fairfax County, Virginia; and Howard County, Maryland. All three are suburbs or exurbs of Washington, D.C. In 2000, 14 of the 100 richest counties were in the Washington, D.C., area. In 2007, it was nine of the richest 20.

All of this is fine if you happen to live in the D.C. area. It's not so great for the country as a whole.

While the D.C. metro area hasn't completely escaped the recession, it's doing much better than most everywhere else. Real estate advisers Grub & Ellis Company recently ranked the D.C. metro area the top market in the country for commercial real estate investment. Investment advisers are high on D.C. area real estate even in down times, because they know the federal government's only going to get bigger. That means more federal employees, more grantees and contractors, and more wealthy lawyers and lobbyists setting up shop inside the Beltway — both to get a piece of the federal budget (or, more recently, the $7 trillion-and-growing pot of federal bailout honey), and, as the federal regulatory state expands, to lobby for regulations most favorable (or, least unfavorable) for their clients.

The problem is that, save for the tech corridor in D.C.'s Virginia exurbs, the Washington Metro area doesn't actually produce anything. Washington doesn't create wealth, it just moves it around — redistributes it. As government grows and takes control of more and more of the private economy — either through spending, regulation, or taxes — more and more wealth that's created elsewhere comes to Washington to be devoured.

The Washington wealth boom is the result of the massive expansion in government over the last 10 years, which has populated the region with an increase in well-paid federal employees, and wealthy federal contractors and lobbyists.

As for federal employees, according to the Bureau of Labors Statistics, as of January 2007, there were 284,000 federal employees living in the Washington, D.C. area, up from 268,000 in 2000. The Cato Institute's Chris Edwards estimates that in 2005, the average federal employee made $106,579 per year including benefits, about twice as much as the average person makes in the private sector. Federal wage are also rising at about twice the rate they are in the private sector.

What about contractors?New York University's Paul C. Light estimates about 7.6 million people earned their paycheck through federal government contracts in 2005, a 50 percent increase since 2002. That increase in contractors doesn't seem to be trimming the number of full-time government jobs, either. The civil service workforce increased over that period, too, though not nearly as dramatically. Taxpayers paid $400 billion to federal contractors in 2007, double what they paid in 2000. Less than half those contracts were won with competitive bidding.

And lobbyists? The Washington Post reports that the number of registered lobbyists in Washington doubled between 2000 and 2005, to nearly 35,000. Not coincidentally, federal outlays increased over that period from $1.79 to $2.29 trillion. The government put more money on the table, so firms were willing to pay more lobbyists higher salaries to go snatch a piece of it.

"People in industry are willing to invest money because they see opportunities here," one lobbyist told the Post. "They see that they can win things, that there's something to be gained. Washington has become a profit center." Well, not exactly. "Profit" usually means providing products or services their customers want, which leads to voluntary, mutually beneficial transactions that leave both parties better off. In Washington, companies pay lawyers to procure money the government has forcibly taken from taxpayers. The only ones better off there are the companies and the politicians—which is worth keeping in mind the next time you hear how public service is an endeavor filled with honor, while the private sector is a playground for the greedy.

National Journal reported in April that D.C. firms spent $2.79 billion lobbying the federal government in 2007, up 7.7 percent from 2006 — in a down economy. Companies spend money only when they're relatively certain they'll get a good return on their investment. I can only speculate what that $2.79 billion bought, but rest assured, its worth a lot more than $2.79 billion.

The outlook from here is grim. As bad as the Bush administration has been about expanding the size and scope of government, President-elect Barack Obama and the Democrats in Congress aren't exactly promising cutbacks. They've promised to expand the federal budget, the federal payroll, and the federal government's influence over the private sector. Obama's stimulus package calls for 600,000 new government employees.

And then there's all of that bailout money. At its core, the concept of a bailout is for the government to take money from people and businesses that didn't make mistakes, and give it to businesses that made lots of them. The waste comes not just from the initial cost to taxpayers, but also in all the money companies will then pay high-dollar lobbyists in Washington to procure a part of it.

America's wealthiest counties ring a city where the chief industry is government — and the entire region's only getting richer. That doesn't seem like a trend that bodes well for the health of a market-based economy.